Managing your finances and knowing how to make your money go further is crucial, but you never know what’s just around the corner. If you’re struggling to stretch your income to the end of the month and you’re hit with an unprecedented expense like a broken boiler, or an urgent car repair, you may be left wondering how you’re going to pay for it. Thankfully, there are options available to help like same day payday loans so you can have access to cash when you need it – which is particularly helpful if you don’t have an emergency fund.
Creating a pot of cash you can use to cover unprecedented expenses in the future is ideal, and means you can handle what life throws at you without having to worry. Here’s how to create your very own emergency fund for the future.
Think about how much you need
If you’re just starting to save, think about how much you’d like to reach as a minimum amount. Generally, it’s said that when saving for an emergency, you should have at least 3 to 6 months’ worth of living expenses saved up. This is going to seem like a huge amount, but don’t be put off. All you need to do is come up with a figure that you can afford to save each month and put your plan into action.
Think about your income and your primary expenses. With the money that you have left over from your income each month, make sure you add an amount to your savings. It doesn’t have to be a huge amount, a small amount is better than nothing and we all have to start somewhere! Thinking about how much you’d like to save, and how much you can afford to save will help you get the ball rolling.
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Set goals
Once you’ve worked out how much you can afford to save each month, you can start setting goals for your money. Goals are a great way of staying motivated, and allow you to look back at how far you’ve come. You could write down your goals, in a diary or on your phone as a way of staying on track. Of course, as you start hitting your goals, they will change, so make sure you update them throughout your savings journey. Building up a savings pot doesn’t happen overnight, but achieving your goals will give you a sense of achievement and means you’re more likely to stay on the right path towards financial stability.
Open a savings account
Another great step to take as your money begins to build up. A savings account means you’ll have somewhere to keep your money so that you can see exactly how much you have. Depending on the type of savings account you choose, you can actually make money on your savings too, which is preferable to it simply sitting in your bank account. Do some research to find a savings account that comes with good interest rates – you can do this online, or head to a local bank for some advice. Make sure that it’s easy to access in case of emergencies.
Stay consistent
Remaining consistent is crucial when creating your emergency fund. Unfortunately, your savings pot won’t mount up overnight, so you need to remain consistent when transferring and depositing a portion of your income into it regularly. You can automate a transfer from your current account into your savings so you don’t forget and miss a month. Remaining consistent and motivated means you will be able to watch your savings account grow before your eyes.
Only use it for emergencies
Last but not least, make sure you only use your emergency fund for emergencies! Try not to dip into it as this will hinder your progress. If you find that you need to decrease the amount of money you’re saving to make your income go further, you can adjust your payments, just try and remain consistent throughout the months to see the best results. Be stubborn with yourself, and think about your goals when you’re tempted to take money out.
